Performance and Growth FINANCIAL MARKET ACTIVITY Singapore Government Securities Market - Crossing Another Milestone The Singapore Government Securities (SGS) market crossed another milestone in January 2005 when SGS became part of the Citigroup World Government Bond Index (WGBI). The WGBI is a well established investment-grade sovereign bond index widely followed by global investors. Among the 22 countries that form the WGBI, Singapore is the only Asian country, apart from Japan, to have qualified. Outstanding SGS rose from S$63.1 billion at end 2003 to S$72.2 billion at end 2004 as new bond issuance outpaced maturities. Gross issuance of SGS bonds for 2004 totaled S$13.9 billion, an increase of S$4 billion from 2003. With S$7.8 billion worth of SGS bonds maturing during the year, the net issuance of bonds was S$6.1 billion for the year. The average daily trading volume for SGS ranged from a high of S$2.6 billion in 2003 to S$1.7 billion in 2004. This largely reflected greater uncertainty in the interest rate environment in the second half of 2004 when the US Federal Reserve raised interest rates. However, trading for the SGS Repurchase Agreement (SGS repo) remained active with the average daily turnover at S$2.2 billion (See Chart 7). The SGS yield curve flattened in 2004 as the short end rose with firmer short rates. On the longer-end of the yield curve, end-investor demand drove yields down (See Chart 8). In May 2004, the SGS Electronic Applications (SGS eApps) facility was enhanced to allow automation of the closing price submission process by primary dealers. This has led to greater efficiency in the collection and the processing of the prices.